Home purchasers who held off from buying in the first half of the year are now looking at a cooler housing market and – perhaps – mortgage rates continuing at near-record lows, at least for now.
Bank Analysts “More Dovish” about Possible Rate Increases
Where mortgage rates are headed in the near-term is becoming a live question as analysts pare their expectations of a September rate increase from the Bank of Canada. Home purchasers looking for the lowest available rates, and current homeowners contemplating refinancing their mortgages, may want to consult a well-resourced mortgage broker to time their mortgage decisions and obtain the most favourable mortgage rates available.
With two rate hikes earlier in the year, the Bank of Canada raised its market-setting bank lending rate from 0.25 per cent to 0.75 per cent, and nearly all analysts predicted another rate increase to 1.0 per cent on September 8th. Now, with lower than expected inflation and softening global markets, there is marked uncertainty as to whether Bank of Canada governor, Mark Carney, will in fact pull the trigger on a further rate hike in September.
Bloomberg cites an e-mail from CIBC rates strategist, Mohammed Ahmed, alerting subscribers that the expected rate increase on September 8 may not be forthcoming. “[A] September hike was largely accepted as being a sure bet until very recently,” according to Mr. Ahmed. Now, he reports, there is growing uncertainty as to the Bank of Canada’s next move. “[T]he market is much less certain,” he notes, with analysts being “the most dovish” they have been regarding future increases since the central bank last raised interest rates on July 20th.
Bloomberg reports that, “probabilities derived from overnight [bond] index swaps show a 62 percent chance the central bank will keep its main rate at 0.75 percent on Sept. 8.” This compares to odds of a rate hike being less than 40 percent earlier this month, according to ScotiaBank. “Bank of Montreal calculations,” according to Bloomberg, “put the likelihood of a pause [in Bank of Canada rate hikes] at more than 60 percent from about 45 percent a week ago.”
Mortgage rates at major banks are closely tied to the Bank of Canada’s interest rate, although sub-prime rates may be negotiated. Well-resourced mortgage brokers may be able to obtain mortgage rates from non-bank lenders that are considerably lower than rates offered by major banks.
